Top Car Loan Application Mistakes and How to Avoid Them

It​‍​‌‍​‍‌​‍​‌‍​‍‌ is quite a thrill to get a car loan; however, the process can be quite risky as you have to be very careful not to get denied, have your application delayed or be charged with extra costs. Here are the most common mistakes of car loan borrowers, which are revealed in this handbook, together with a few pieces of straightforward advice that are supported by data on how to avoid these errors and get your car loan without any ​‍​‌‍​‍‌​‍​‌‍​‍‌hassle.

Why Do Car Loan Applications Fail?

Do you know why car loan applications get derailed? This happens due to many factors, including a lack of proper documentation, a lack of realism due to the amount requested, or a breakdown of the eligibility requirements needed for the specific loan type, as well as ignoring the requested credit score or the provided score not being sufficient to obtain a loan. Also, not doing the proper market research for lenders can cost you as well. All of these issues can result in a car loan application being delayed, as well as the allocation of higher EMIs as opposed to the requested/previous amount, or the complete denial of the loan requested. Additionally, there can even be the result of higher-than-expected (surprise) fees or the loan being stopped due to a possible denial.

Top Car Loan Application Mistakes to Avoid

Ignoring Credit Score

Your credit score is perhaps the most important factor that lenders consider. Any score below 700 will most likely result in your application being rejected, or you will be charged a very high-interest rate, regardless of your income. Make it a point to always check your CIBIL or any other credit report before you decide to apply for a loan or credit. Pay off your outstanding dues and do not open any new credit accounts just before the time of your application.

Also Read: Minimum Credit Score Required for a Two-Wheeler Loan in India

Incomplete or Expired Documents

In most cases, the submission of incomplete or expired documents may lead to the instant rejection of an application or major delays in the processing. The necessary documents normally are Aadhaar, PAN, a valid address proof, recent salary slips or IT returns, bank statements, vehicle RC, and insurance papers. Before you submit your application, be sure to check that all your documents are valid and prepare the originals as well as the copies.

Overestimating Loan Amount or Underestimating EMIs

When a person requests a loan amount that is far beyond what their income can realistically support, the situation will most likely end up in an EMI default or even the risk of total loss of the money lent to that person. Employ the use of EMI calculators to determine the amount of loans and the tenure that will fit your monthly budget, and at the same time, allow you to set aside some money for maintenance and emergencies. Do not get carried away to the extent of using up the entire approved limit just because it is ​‍​‌‍​‍‌​‍​‌‍​‍‌there.

Not Comparing Multiple Lenders

Assuming that the first lender offer is the best deal is a common misconception and can lead to accepting higher interest rates or higher hidden fees that can cost thousands of dollars over the length of the loan. Always compare a minimum of 2-3 lenders as interest rates do vary and can have huge impacts on the payments. Processing fees and the presence of a prepayment penalty can also have a huge impact. You can use online loan aggregators or just go to a financial advisor for impartial comparisons.

Ignoring Eligibility Criteria

Every lender has pretty strict eligibility guidelines that are based on the borrower’s age, income, employment status, and also the age or condition of the vehicle. Failure to meet the requirements can cause an application denial. Before proceeding to apply for the loan, confirm that both you and your desired vehicle meet the specified requirements and guidelines.

Overlooking the Fine Print

Loan agreements can hide such things as prepayment penalties, mandatory add-on insurance policies, and secret processing fees. Ignoring these can result in money you weren't expecting to have to pay. Go through every bit of the paperwork by yourself, and if there is a term that you don't understand, ask your lender for an explanation. It is best not to sign if you do not fully understand all the fees and terms.

Rushing Through Forms and Application

Incompletely filled-out application forms can lead to refusals and outdated lists, which can lead to delays. Ensure to spend ample time completing forms and checking all documents and details completed to accompany your application. If there are missing lines to fill, if there are corrections to be made, it is up to the applicant to confirm that all details are completed.

Not Negotiating Loan Terms

A great number of borrowers simply go along with the lender's offer of interest rate and terms without making an attempt to negotiate. Lenders, however, may provide better rates and fewer fees to a well-qualified borrower who has a good credit score and presents a competing offer. You can, and you should talk with the lender about the interest rates and request that the processing fees be waived if you don’t want to ​‍​‌‍​‍‌​‍​‌‍​‍‌negotiate.

How to Communicate Properly With Lenders

• Ensure​‍​‌‍​‍‌​‍​‌‍​‍‌ that you have all the essential documents prepared beforehand.
• It would be a good idea to check your credit score and make sure that it is higher than 700 before you submit your loan ‌ ‍ ​‍​‌‍​‍‌​‍​‌‍​‍‌application.
• Analyse at least three lenders' offers on the primary terms.
• Carefully look over the clauses in your loan agreements.
• Always​‍​‌‍​‍‌​‍​‌‍​‍‌ remember to negotiate from a position of power and awareness.

Conclusion

If you get yourself ready, show patience, and put in the effort, you will be able to stop errors in car loan applications which are caused by making a guess, hurrying, or not checking your ​‍​‌‍​‍‌​‍​‌‍​‍‌credit. Make sure you have all the necessary documents ready, compare different lenders, and take a good look at every piece of paper that you have to sign, instead of guessing or ​‍​‌‍​‍‌​‍​‌‍​‍‌rushing. By doing this, you will be able to save both time and money, car loan approval will be a certainty, and you will be able to get your vehicle without any unexpected situations. If you want reliable and honest assistance with your car loan, get in touch with Muthoot ​‍​‌‍​‍‌​‍​‌‍​‍‌Capital.